update on group strategy - swiss re · 2019-10-22 · thought-leadership publications curated data...

Update on Group strategyChristian Mumenthaler, Group Chief Executive Officer

Investors' Day | Zurich, 4 April 2018 4

Based on three differentiation drivers we have built leading insurance businesses…

Client Access

RiskKnowledge

CapitalStrength

Reinsurance

•#1 global property reinsurer

• Top 2 global reinsurer

Corporate Solutions

• Top 5-10 in Excess Layer market

•Growing in Primary Lead segment

Life Capital

• Leading UK life & pension consolidator

• Leading L&H B2B2C platforms in core markets

P&C Reinsurance L&H Reinsurance

•#1 global reinsurer in High Growth Markets

Investors' Day | Zurich, 4 April 2018 5

…that represent a highly rewarding combination for shareholders

The strong value creation of our individual businesses… …has consistently produced peer-leading margins

Total contribution to Economic Net Worth (USD bn) US GAAP net operating margins average 2012-17

14% 7%

1.9

2016

4.2

2015 2017

6.3

2012

5.2

3.7

2014

5.2

2013

Ordinary dividends in

each year more than covered by economic

value creation

Reinsurance marketSwiss Re Group ¹

¹ Based on weighted average of Munich Re, Hannover Re, SCOR and RGA

P&C Reinsurance L&H Reinsurance Corporate Solutions

Life Capital Group Items Ordinary dividends

UnderwritingInvestment Operating expenses

Investors' Day | Zurich, 4 April 2018

…to benefit P&C Reinsurance and Corporate Solutions

Current market environment improved

Improvements in P&C pricing…

…to benefit the return profile of our investment portfolioIncreasing interest rates…

Long-term opportunities remain

…we can access global risk pools through all Business UnitsRisk pools continue to grow…

…we are the #1 global reinsurer in High Growth MarketsOpportunities in High Growth Markets…

…we develop innovative solutions to increase insurance coverage

Protection gap still expanding…

We are benefiting from a more positive current environment and promising long-term opportunities

5%overall market growth

expected1

8% market growth

expected in High Growth

Markets1

6

¹ Source: Swiss Re Institute; expected premium growth per annum in reinsurance in nominal USD terms over the next five years


P&C Reinsurance’s strong track record of generating shareholder value leads the industry

7

UnderwritingInvestmentOperating expenses

Strong new business profits driven by P&C Reinsurance’s leading client

platform

Peer-leading underwriting

margins are driven by both, capital

allocation (beta) & risk selection (alpha)

…resulting in peer-leading margins

19%

P&C Reinsurance L&H Reinsurance Corporate Solutions Life Capital

0.3

1.2

1.5

1.7

1.2

2017

-1.5

20162015201420132012

USD 4.4bn EVM new business

underwriting profit since 2012

¹ Based on weighted average of P&C Re segments of Munich Re, Hannover Re, SCOR, Everest Re and Alleghany

EVM profit – new business (USD bn)

Economic underwriting profits in excess of EVM capital costs...

US GAAP net operating margins average 2012 - 17

15%

Swiss Re P&C Re P&C reinsurers 1



Swiss Re L&H Re L&H reinsurers1

EVM profit – new business (USD bn)

L&H Reinsurance’s franchise value continues to increase

8

Strong new business profit

mostly from EMEA and Asia reflecting

the Group’s increased footprint

Outperformance vs. market supported by decisive and timely

management actions on underperforming blocks of business


10% 6%

Economic underwriting profits in excess of EVM capital costs...

US GAAP net operating margins average 2012 - 17

1.01.1

0.7

0.5

0.60.6

201720162013 20152012 2014

USD 4.5bn EVM new business

underwriting profit since 2012

¹ Based on weighted average of L&H Re segments of Munich Re, Hannover Re, SCOR and RGA

…resulting in peer-leading margins


UnderwritingInvestmentOperating expenses


Swiss Re’s reinsurance client franchise represents the biggest source of our competitive advantage

9

We have strong direct relationships with our customers…

% of premiums from non-intermediated business,

FY 2017

P&C Reinsurance L&H Reinsurance EVM profit - new business (USD m)

Client example

Swiss Re

APAC

Americas

EMEA


51% 96%

0

100

200

300

400

500

600

700CAGR 11%

20172016201520142013201220112010

L&H ReinsuranceP&C Reinsurance

Direct relationships drive our access to large & tailored transactions

…with distinct client interactions


Underwriting year (UWY)

Commercial insurance has been an attractive business for our shareholders, generating long-term underwriting profits in excess of EVM capital costs

10

Swiss Re wrote commercial business with EVM underwriting profits in excess of capital costs of > USD 2bn since 2000

Commercial business premiums grew with a compounded annual growth rate of 10%


This translates into an average annual EVM profit in excess of EVM capital costs of USD 125m

Underwriting performance of Swiss Re’s commercial insurance business¹, USD bn

World Trade Centre

Carve-out of Corporate Solutions as separate BU

1.6

0.4

2003

1.6

0.4

2002

1.3

0.4

2001

1.0

-1.0

2000

0.7

-0.3

2017

3.8

-0.6

2016

3.8

0.0

2015

3.5

-0.2

2014

3.6

0.3

2013

3.5

0.3

2012

3.1

0.3

2011

2.5

0.2

2010

2.3

0.3

2009

2.0

0.2

2008

2.2

0.2

2007

2.3

0.5

2006

1.7

0.6

2005

1.5

0.0

2004

HIM, California Wildfires

Earthquake Chile

Earthquake Japan

Hurricane Katrina, Rita, Wilma

¹ Reflects commercial business written by underwriting year, gross of intra-group retrocessions, net of external cessions; excludes commercial business written in derivative form

EVM gross premiums written

EVM profit - underwriting

Average annual EVM profit


USD >5bn reserves left in Reinsurance

when carved-out in 2012

TFC impact from positive reserve developments of

7%pts on average per year

11

Corporate Solutions’ performance has been attractive, in particular when considering the total financial contribution

Total financial contribution (TFC) refers to the estimated contribution of Corporate Solutions business written within Swiss Re Group, incl.

• development of historical loss reserves remaining in the Reinsurance BU after the carve out from Reinsurance in 2012

• related investment income and additional tax expenses

UnderwritingInvestment Operating expenses

Total financial contribution (TFC) impact

Corporate Solutions as reported

Corporate Solutions total financial contribution

US GAAP - Net operating margins, average 2012-17

6%

16%

+3%pts

+7%pts

TFC impact from investment

income on reserves of 3%-pts on average

per year




Corporate Solutions has comparably strong TFC

underwriting margins

Investments into future growth drives higher

expense margins compared to peer average

12

Net operating margins compare favourably versus peers, driven by a strong underwriting margin

UnderwritingInvestment

15%42% 23% 21% 9%18%11% 17% 10% 7% -19%

Operating expenses

2013 2014 2015 2016 20172012

6%

Corporate Solutions

Peer average1

US GAAP net operating margins incl. TFC on average 4%pts above peer average


Corporate Solutions

Peer average1

Corporate Solutions

Peer average1

Corporate Solutions

Peer average1

Corporate Solutions

Peer average1

Corporate Solutions

Peer average1

¹ Based on the weighted average of reported results of six Corporate Solutions peers



ReAssure maintains a market-leading closed book platform in the UK

13

ReAssure’s closed book transactions track record

Life Capital’s dividend stream is driven by the closed book business(USD 3.8bn since 2012)³

5

4

3

2

1

0

Policy count (in million)

2017120162015201420132012201120102009200820072006200520042003

Current closed bookTransactions

USD bn

ReAssure is a major cash

generator of the Group

Recent transactions delivered a

return average of >12%

MS&AD participation2

increases ability to pursue further

closed book transactions

1.1

0.40.40.40.4

1.1

201720162015201420132012


Funding from Group for Guardian

transaction in 2016:

USD 1.6bn

¹ L&G transaction pro-forma, reinsurance agreement effective from 1 January 20182 Announced in October/ December 2017; completed in January 20183 For FY 2012- 15 published results refer to Admin Re®



Life Capital businesses capture growth opportunities in attractive primary L&H risk pools

14

The protection gap in sum

assured terms is > USD 100trn and growing

Positive customer journeys and cost leadership remain key differentiators

B2B2C platforms delivering

dynamic growth


Gross premiums written, life insurance business (USD m)

elipsLife premium volume

¹ Cumulative numbers do not include acquired portfolios


iptiQ new policies development

0

100

200

300

400

500

20102008 20142012 2016 2018

# new policies written, cumulative¹

201820172014 2015 2016


Our near-term priorities remain unchanged

15

broadenand diversify client

base to increase access to risk

optimise resources and

platforms to support capital allocation

systematically allocate capital to risk pools / revenue streams

emphasise differentiation

I

II III

IV

Growth

through systematic capital

allocation

Risk Knowledge

supporting capital allocation

Large & tailored transactions

Corporate Solutions

Life Capital

High Growth Markets

Research & Development

Technology

Swiss Re’s strategic framework Near-term priorities

We are a risk knowledge company that invests in risk pools

People & Culture

RoE ≥ risk free

+700bps

ENW per share growth

+10% p.a.

Group financial targets over-the-cycle


R&D builds on our thought leadership position, bringing us closer to the needs of our clients

Insurance “beta”

Target Liability Portfolio

Strategic Asset Allocation

R&D improves top down capital allocation leading to outperformance

50-60%

Estimated annual underwriting outperformance:

>USD 1bn1

Product design

Product pricing

Underwriting criteria

How R&D drives value at Swiss Re:

40-50%

Client services

Thought-leadership publications

Curated data

Cost efficiency

Business process disruption & improvement

R&D improves risk selection and further portfolio steering given allocation

R&D provides services and thought leadership enabling higher pricing

R&D provides new ideas to reduce the cost of generating a given unit of revenue

~450 FTE in 13 R&D teams

Insurance “alpha”

>200 R&D initiatives

ongoing (50% focusing on technology)

¹ Based on average annual gross underwriting margin outperformance vs. peers in the last five years

16


Advances in technology are impacting the insurance value chain and reshaping the competitive landscape

Today Tomorrow

Impact of technology on insurance

17

Limited demonstrated business impact but heightened interest and hype

Long-term fundamental changes to the insurance value chain

Blurred industry boundaries and shifting insured risks (from personal to commercial lines)

Digitalisation improves the

design and pricing of new and

existing insurance products

Insurers expected to leverage new technology to acquire new

customers, improve underwriting and

increase efficiency


We remain focused on improving our business and developing solutions for ourselves and our clients to secure access to risk pools through our business segments and strategic partnerships


Swiss Re’s tech strategy is embedded in our business strategy and ensures effective innovation management

18

1 2

34

OUR CLIENTS OURSELVES

OUR EXPOSUREOUR DATA

Examples: Magnum, Life Guide, CatNet, Liability Risk Drivers

Swiss Re tech strategy

Examples: ATLAS, digital claims, document intelligence

Examples: iptiQ, elipsLife, dynamic parametric pricing platform, Pulse Example: Stargate platform

Increase our clients’ competitivenessProvide tools and solutions for clients’ value chains

Improve our value chainApply technology to Swiss Re’s value chain

Harvest full potential of dataBuild up competitive advantage from proprietary data

Get closer to riskSeek access to risk pools through tech platforms

Our tech strategy is implemented with a combination of in-house developments and strategic partnerships


Increase our clients’ competitivenessExample: Magnum is our market-leading automated underwriting solution for life & health

19

>10 millionapplications processed in

2017

>40 clients

worldwide

Available in 29 countries and 17 languages

Magnum Pure is our advanced, automated underwriting solution

Easily build and optimise the ideal customer journey and underwriting rules

Receive unprecedented insights into the underwritten business

Magnum Mobile offers innovative underwriting for mobile devices

Integrates into an agent’s or client’s insurance app

Enable their customers to be underwritten anytime, anywhere

Our solutions

Value for our insurance clients: Automation drives scalability

Consistent, predictable underwriting decisions

Risk management standards across channels and products

Rules-driven assessment, aligned to Swiss Re’s LifeGuide underwriting philosophy

Faster, efficient underwriting decisions

Shorter application times, quicker decisions, easy and secure reports & analytics

Easy creation of tailored rules, for smoother go-to-market

Magnum represents a tailored and integrated underwriting platform which delivers significant value to our clients and strengthens our relationship

1


OUR DATA OUR EXPOSURE

1


Improve our value chainSelected examples: We leverage scalable technology platforms to streamline internal processes

20

Multi-year effort to provide us with an industry-leading steering and reporting platform

2

ATLAS – New general ledger and financial steering capabilities

Our ambition is to have every piece of data fully digitised and automatically understood

Document intelligence

60 million contract pages

processed automatically

>15 million documents covered by intelligence

platform

Expand leadership position in terms of volumes and turnaround times of digitised bookings

Digital claims and technical accounting

80% of all client documents digitised by

2020 (43% today)

7 solutionsrunning on one single platform

>1.4million digitised

bookings by 2020

(~0.7million today)

90% process

standard-isation

5-dayclosing of quarters

Major roll out in 2018-2023

80%efficiency gains in processing

client documents by 2020(63% today)


OUR DATA OUR EXPOSURE

2


Get closer to risk Example: iptiQ is our L&H B2B2C platform with industry leading end-to-end digital capabilities

21

Sales: digital front-end platform

Omni-channel: accessible from various devices

Data & reporting: integrated & automated management information reporting

Underwriting: industry-leading automated underwriting

A truly digital experience…

Self-service: empower customers to self-manage policies

Fully digital B2B2C insurance solution allowing “plug & play” with any client and partner, enabling vast consumer access and contextual sales

Live in 5 markets

12 distributors onboarded

Dynamic growth to continue

3

…with compelling competitive advantages

Cost efficient due to disintermediation of traditional insurance distribution and no retail distribution legacy

Knowledge based differentiation with industry leading R&D capabilities

Balance sheet strength of Swiss Re Group to support growth


OUR DATA OUR EXPOSURE3


External data Weather, IoT/wearables

Harvest full potential of dataExample: Stargate platform provides the opportunity to transform Swiss Re into a truly data-driven knowledge organisation

22

4

Stargate platform

Stargate platform accelerates the integration of Swiss Re’s data landscape

Data

Internal dataStructured/unstructured

Machine learning Data visualisation

Methodology

Analytics at scaleData integration/GDPR compliance

Upskilled workforce2 000 users by 2020

People

DemocratisationData and analytics

>50 initiatives across the group to be implemented by the end of 2019

Scalable enterprise wide platform for integrating, analysing & deriving insights on massive data sets


OUR DATA OUR EXPOSURE4


We are a risk knowledge company that invests in risk pools

23

• We have built leading (re)insurance businesses based on three differentiating factors: Client Access, Risk Knowledge and Capital Strength

• These businesses ensure access to growing risk pools in the long term

• The overall market outlook has improved for our P&C businesses and we will benefit from the positive momentum

• Our scale, access to clients, risk data and advanced platforms position us well to play a major role in the technological revolution in the insurance space

• Swiss Re’s tech strategy is embedded in our business strategy and is implemented with a combination of in-house developments and strategic partnerships



Cautionary note on forward-looking statements

Certain statements and illustrations contained herein are forward-looking. These statements (including as to plans, objectives, targets, and trends) and illustrations provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to a historical fact or current fact.

Forward-looking statements typically are identified by words or phrases such as “anticipate”, “assume”, “believe”, “continue”, “estimate”, “expect”, “foresee”, “intend”, “may increase”, “may fluctuate” and similar expressions, or by future or conditional verbs such as “will”, “should”, “would” and “could”. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the Group’s actual results of operations, financial condition, solvency ratios, capital or liquidity positions or prospects to be materially different from any future results of operations, financial condition, solvency ratios, capital or liquidity positions or prospects expressed or implied by such statements or cause Swiss Re to not achieve its published targets. Such factors include, among others:

• the frequency, severity and development of insured claim events, particularly natural catastrophes, man-made disasters, pandemics, acts of terrorism and acts of war;

• mortality, morbidity and longevity experience;

• the cyclicality of the insurance and reinsurance sectors;

• instability affecting the global financial system;

• deterioration in global economic conditions;

• the effect of market conditions, including the global equity and credit markets, and the level and volatility of equity prices, interest rates, credit spreads, currency values and other market indices, on the Group’s investment assets;

• changes in the Group’s investment result as a result of changes in the Group’s investment policy or the changed composition of the Group’s investment assets, and the impact of the timing of any such changes relative to changes in market conditions;

• the Group’s ability to maintain sufficient liquidity and access to capital markets, including sufficient liquidity to cover potential recapture of reinsurance agreements, early calls of debt or debt-like arrangements and collateral calls due to actual or perceived deterioration of the Group’s financial strength or otherwise;

• any inability to realise amounts on sales of securities on the Group’s balance sheet equivalent to their values recorded for accounting purposes;

• changes in legislation and regulation, and the interpretations thereof by regulators and courts, affecting us or the Group’s ceding companies, including as a result of shifts away from multilateral approaches to regulation of global operations;

• the outcome of tax audits, the ability to realise tax loss carryforwards, the ability to realise deferred tax assets (including by reason of the mix of earnings in a jurisdiction or deemed change of control), which could negatively impact future earnings, and the overall impact of changes in tax regimes on business models;

• failure of the Group’s hedging arrangements to be effective;

• the lowering or loss of one of the financial strength or other ratings of one or more Swiss Re companies, and developments adversely affecting the Group’s ability to achieve improved ratings;

• uncertainties in estimating reserves;

• policy renewal and lapse rates;

• uncertainties in estimating future claims for purposes of financial reporting, particularly with respect to large natural catastrophes and certain large man-made losses, as significant uncertainties may be involved in estimating losses from such events and preliminary estimates may be subject to change as new information becomes available;

• extraordinary events affecting the Group’s clients and other counterparties, such as bankruptcies, liquidations and other credit-related events;

• legal actions or regulatory investigations or actions, including those in respect of industry requirements or business conduct rules of general applicability;

• changes in accounting standards;

• significant investments, acquisitions or dispositions, and any delays, unexpected costs, lower-than expected benefits, or other issues experienced in connection with any such transactions;

• changing levels of competition, including from new entrants into the market; and

• operational factors, including the efficacy of risk management and other internal procedures in managing the foregoing risks and the ability to manage cybersecurity risks.

These factors are not exhaustive. Swiss Re operates in a continually changing environment and new risks emerge continually. Readers are cautioned not to place undue reliance on forward-looking statements. Swiss Re undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.

This communication is not intended to be a recommendation to buy, sell or hold securities and does not constitute an offer for the sale of, or the solicitation of an offer to buy, securities in any jurisdiction, including the United States. Any such offer will only be made by means of a prospectus or offering memorandum, and in compliance with applicable securities laws.


Investor Relations contacts

Hotline E-mail+41 43 285 4444 [email protected]

Philippe Brahin Jutta Bopp Manfred Gasser+41 43 285 7212 +41 43 285 5877 +41 43 285 5516

Chris Menth Iunia Rauch-Chisacof+41 43 285 3878 +41 43 285 7844

Corporate calendar & contacts

Corporate calendar

201820 April 154th Annual General Meeting Zurich4 May First Quarter 2018 Key Financial Data Conference call3 August Half-Year 2018 Results Conference call1 November Nine Months 2018 Key Financial Data Conference call


Legal notice

©2018 Swiss Re. All rights reserved. You are not permitted to create any modifications or derivative works of this presentation or to use it for commercial or other public purposes without the prior written permission of Swiss Re.

The information and opinions contained in the presentation are provided as at the date of the presentation and are subject to change without notice. Although the information used was taken from reliable sources, Swiss Re does not accept any responsibility for the accuracy or comprehensiveness of the details given. All liability for the accuracy and completeness thereof or for any damage or loss resulting from the use of the information contained in this presentation is expressly excluded. Under no circumstances shall Swiss Re or its Group companies be liable for any financial or consequential loss relating to this presentation.

update on group strategy - swiss re · 2019-10-22 · thought-leadership publications curated data...

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